As the time nears for the 116th Congress to come to an end, it has become clear that it is more important than ever to work together to get the FICA Tax Tip Credit included in COVID relief stimulus legislation. The beauty industry needs every voice speaking up to ensure there are Members of Congress that will advocate for this targeted relief!
The beauty industry has exceeded expectations by modifying the salon environment and creating new policies for both employee and client safety. Yet, with COVID cases on the rise, beauty professionals are not immune to state closures. Much relief is needed, including an expansion of the Paycheck Protection Program (PPP), PPE credits, and a retroactive application of the 45B FICA Tax Tip Credit (H.R. 1349/S. 2634). We are asking Congress to pass a COVID relief bill that will address these issues and more, including the inevitable housing crisis and unemployment benefits.
To understand how the 45B FICA Tax Tip Credit could help salon employers now, it’s important to know an employer and employee each pay a 7.65% payroll tax to cover the Federal Insurance Contributions Act - FICA contribution which is comprised of both social security and Medicare tax. While the employee receives credits toward these benefits as these contributions are paid to the federal government, the employer does not. The 45B FICA Tax Tip Credit allows employers to claim a credit for their portion of the 7.65% of taxes paid only on employee tips. The employer will still pay into their portion of the contribution, and the employee still receives full credit for their FICA taxes, however this legislation will then provide the employer a credit on their portion paid on tips.
The employer does not gain any revenue from tips and Congress has already recognized that employers should not be responsible for taxes on tips, by extending this credit to the restaurant industry decades ago. The FICA Tax Tip Credit does not harm or impact the employee in any way.
Access to a reimbursement of employer taxes paid on tips could provide immediate liquidity for salon owners that need funding now to stay open and keep their employees.
Prior to the pandemic, the Professional Beauty Association’s National Industry Profile reported that 83 percent of salon businesses had fewer than 10 employees. Sixty percent of these businesses are owned by women which is three times higher than the overall economy. Fourtneen percent of those in the industry are African American – three in ten barbers are African American. Twenty-two percent of professionals are Asian, and seventeen percent are Latino. Overall, 84 percent of licensed beauty professionals in the industry are women.
As women and minorities continue to be disproportionately affected by the COVID-19 pandemic and the economic fall-out that has accompanied it, and the beauty industry has been hit harder than any other industry, there is no question targeted relief is needed. You can help by participating in our outreach campaigns to your Members of Congress. Visit probeauty.org/fica to contact your representative, share the campaign with your social networks, and take it a step further by sending a personal email or asking for a follow-up call. Need help getting more involved? Email PBA’s Advocacy Program Manager, Kati Rapoza firstname.lastname@example.org
Your voice makes a difference! Together we can speak for the industry.